The Implications of NASDAQ’s Diversity Initiative

This proposal, if approved, would require businesses to push forward equal representation of females and URM leaders in their boards and throughout their companies.

At RDW, we understand the need for diversity and have worked to evolve alongside our clients on this front.

Employee and firm diversity is an issue that American business has been trying to address for many years. Despite countless firm-level diversity initiatives focusing on topics like race, gender, disabilities, sexual orientation – the majority of boardrooms in America still fail to portray an accurate representation of the firm’s customers, staff, and shareholders. Adena Friedman, the CEO of NASDAQ, is aware of this issue and how prevalent it is among the companies listed under her stock ticker. According to the company’s report, there are currently more than 3000 companies listed under the NASDAQ ticker; women hold less than 25% of board seats, African Americans hold only 4%, and African American women a mere 1.5%.

NASDAQ has proposed an initiative that would take a top-down approach to the issue: on December 1st, the stock exchange filed a proposal with the SEC to adopt new rules related to diversity that would apply to all companies listed under the NASDAQ ticker. Under the new proposal, companies would be required to have public disclosure of diversity statistics related to their board of directors. Companies would also have to have or explain why they do not have, at least two diverse directors: one who identifies as female and one who identifies as an Underrepresented Minority (URM) or LGBTQ+.

NASDAQ understands that for many companies this level of change to their board is not a move that can be made immediately. 75% of companies listed on the NASDAQ ticker currently do not fulfill these requirements. If the SEC were to approve this proposal, companies would be given two to five years to achieve the outlined goals. Certain smaller and foreign companies would also be able to forgo the requirement for a URM or LGTBQ+ board member – satisfying the requirement with two female directors instead. Other large financial firms like BlackRock, Vanguard, and Goldman have undertaken diversity guidelines that impact the companies they work with, but there has never been an approach with the scale suggested by NASDAQ.

This proposal, if approved, would require businesses to push forward equal representation of females and URM leaders in their boards and throughout their companies. Diverse leaders make a company more innovative and agile; providing a unique perspective on how to overcome challenges and assess risk. Friedman argues by bringing in varying opinions and voices, companies can stay more in tune with the needs and desires of their diverse consumer bases and create more sustainable business models. Diverse leaders at the board level also promote a firm-wide inclusive culture which allows for individual contributions to be valued and differing viewpoints to be heard - diversity and inclusion together lead to better business outcomes.

A workplace facilitated by inclusive leaders is far more effective. The most gender-diverse companies are 15% more likely to have financial returns above industry averages. Ethnic diversity and gender diversity can both set a company apart from others, yet both combined can produce even better financial results. Organizations with inclusive cultures are: two times as likely to meet or exceed financial targets, three times as likely to be-high-performing, six times more likely to be innovative and agile, and eight times as likely to achieve better business outcomes.

Many large global consulting firms have been aggressive on the diversity initiative – announcing public goals and publishing transparent information to hold themselves accountable on diversity hiring. For example, in 2017, Accenture announced that it would attempt to reach a completely 50/50 gender-balanced workforce by 2025 – if successful, Accenture would be the first professional services firm to achieve this goal. Beyond publishing transparent diversity information, Accenture also provides mentorship opportunities for women in the firm, outsized referral bonuses, and keeps a stern eye on pay-equity within the company. These companies realize they must be transparent and support minority groups in their workforce to advance the diversity initiative. Consulting firms, like Accenture, consistently offer networking groups to support consultants from minority groups. 90% of US consulting firms have implemented some form of flexible working policy — creating accommodations for employees with disabilities as well.

In the technology industry, on the other hand, the percentage of women entering has declined from 33% (in 2014) to 28%. According to McKinsey, the situation is worse for women of color, with URM women only making up 4 percent of roles in the computing workforce — almost none of which are senior leadership. This new proposal by NASDAQ could be a major change in turning the tide towards equal representation, however, it will prove challenging for many NASDAQ firms to meet these requirements under the suggested timeline without outside assistance.

At RDW we understand the need for diversity and have worked to evolve alongside our clients on this front. We’ve actively partnered with our professional services and technology clientele on executive searches designed to bring greater diversity to their leadership, as well as advising them around how to attract and retain top female and URM leaders. While this has been a priority here for several years, in 2020 we adopted this approach across all of RDW by making diversity a core component of our retained search offering. In any industry or market, we endeavor to meet the metric of presenting shortlists that are more than representative of the diversity present in the overall talent pool. This gives our clients better chances of finding the skills and experience they need in a candidate with a diverse background. The results have been encouraging, in that our firm placed a greater proportion of diverse candidates in every year since 2017. On a personal note, the HR Advisory offering I lead for RDW in the US has seen greater demand over this same period and allowed me to introduce the approaches taken by leading organizations to many of our clients. We expect our commitment to this critical business priority to remain central to our mission. The recent news out of NASDAQ is very welcome: it’s a significant milestone for American companies, and we expect that it will encourage the adoption of more aggressive approaches to diversity across the business world.

Written by

Talia Preda

Managing Partner (US)

Expertise: Human Capital, Diversity, Technology, and Strategy & Operations

Geographies: Global

T: 646-899-6882


Read More


McKinsey: “Why Diversity Matters”

Mckinsey Diversity Database

Juliet Bourke, Which Two Heads Are Better Than One? How Diverse Teams Create Breakthrough Ideas and Make Smarter Decisions (Australian Institute of Company Directors, 2016)

Alice Noyalle, Partners in the Future: Leaders of Tomorrow